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Jarom Hobi

Mr. Gardner

Couture Octopi

1 November 2018

The Minimum Wage Debate

Would the $15 minimum wage have a positive or negative effect on the economy? This

question has been a source of controversy for years. This policy leaves members of political

parties and independent identifying people divided over their concern for low skilled workers

and their predictions on how it will affect the broader economy. One side of the argument, which

is common among those who believe that government intervention in business is needed, is that

low skilled workers are being exploited for their work and not getting the compensation they

deserve. They believe that the federal minimum wage should be raised to $15 to lift these

workers from poverty and to give them a leg up in life. The other side of the argument, common

among free market enthusiasts, believe that the minimum wage will hurt workers and damage the

economy more than it will help, leaving the economy with more problems than it started with.

Those in favor of the $15 federal minimum wage believe that the government has a role

to play in business when it comes to wage allocation. These advocates believe that without the

government stepping in to protect workers from low wages and bad working conditions

companies would take advantage of people and exploit them for their labor. They oppose the

idea of people working a job that leaves them far under the poverty line when, in many cases,

their bosses are becoming extremely rich off of their labor. In pursuit of overall fairness and

quality of life for all, many claim that if low wage workers earn more money the economy will

grow and have a positive effect on our nation. This is where the minimum wage comes in. The
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current federal minimum wage is $7.25 per hour. The proposed minimum wage would more than

double the current minimum wage and increase the pay of many low skilled workers. Those in

favor of the increase make the argument that the increase in wages would better the lives of

millions. “The $15 option would increase the wages of 17 million workers whose wages would

otherwise be below $15 per hour, CBO estimates. The wages of many of the 10 million workers

whose wages would be slightly above the new federal minimum would also increase.” (The

Effects on Employment and Family Income of Increasing the Federal Minimum Wage.) They

believe this issue will help more than poverty and overall money issues. Proponents of the higher

minimum wage echo many of the arguments made by those in favor of universal basic income.

Both groups share the belief that if people have more money it will lead to an increase in time to

pursue hobbies and other sources of meaning which would lead to an overall increase in

happiness and well being along with a positive impact on the economy.

Critics of the $15 federal minimum wage claim that while the wages of many would go

up, unemployment would increase along with inflation and automation which hurts workers

more than anyone else. They argue that “...only 11.3% of workers who will gain live in poor

households, compared to 15.8% from the last (minimum wage) increase.” (Sabia). Many will

point out that if the minimum wage policies aren’t targeting people living in poor households, the

increases wages won’t affect the right people. The common point of disagreement is the value of

the jobs receiving the minimum wage. Free marketers believe that the minimum wage was never

meant to feed a family, while others claim that it is immoral to make someone work for such

meager wages. Free marketers claim these jobs are meant to be an entry level job where

unskilled workers learn the skills needed to move up the ladder and eventually become qualified

for a higher paying position. By making the minimum wage $15 many claim the law will hurt
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unskilled workers who are not yet worth that wage, believing that it will be robbing them of vital

work experience by making the standard of employment so high. Another main concern of those

opposed to the new minimum wage is automation. Those who claim to have experience in

business believe that “Corporate executives will recognize that the $15 per hour could be

routinely raised... It's easier and less expensive to have technology take over. The unintended

consequence will be that there will be far fewer jobs available for those that need them most”

(Kelly). Their concern is that the minimum wage will be so high that companies will be losing

money if they keep workers, so they will make the switch from humans to machines. The theory

is that because companies are profit maximizing organizations they will weigh the costs of

paying employees vs machines and inevitably choose to automate in order to save money or,

often times the case for smaller companies, to stay in business. Those fearful of the higher

minimum wage also point to particular industries such as the car wash industry in NYC that was

negatively affected in terms of employment numbers and an increase of automation during the

implementation of the $15 minimum wage in their city. Researchers also found that many car

washes closed down hurting the economy of the area (ReasonTV). Many people also fear the job

losses and inflation that come with the higher minimum wage. (See figure 1)
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(Fig. 1) American Enterprise Institute. Seattle (city only) monthly employment, Jan 2007 to Dec

2015. Forbes.com. February 19 2016.

Seattle saw a significant drop in employment and a rise in inflation after the $15 minimum wage

went into effect. Those who are opposed to the higher wage law often sight the failure of New

York and Seattle as reason to keep the minimum wage as it is:

The $15 option would affect family income in a variety of ways. In CBO’s estimation, it

would: Boost workers’ earnings through higher wages, though some of those higher

earnings would be offset by higher rates of joblessness; Reduce business income and

raise prices as higher labor costs were absorbed by business owners and then passed on to

consumers; and Reduce the nation’s output slightly through the reduction in employment

and a corresponding decline in the nation’s stock of capital (such as buildings, machines,

and technologies). (The Effects on Employment and Family Income of Increasing the

Federal Minimum Wage.)

These negative effects cause many people to doubt the effectiveness of raising the minimum and

whether it’s existence will do more to hurt the economy than help. Many of the critics of the
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proposed wage happen to be economists as well. A survey of US economists by Dr. Loyd Corder

found that “74% of economists oppose raising the minimum wage to $15 and that only 6% of

economists believe that a $15 minimum wage is an effective way of targeting individuals in

poverty” (Survey of US Economists on a $15 Federal Minimum Wage).

Prior to my research on this topic I opposed the $15 federal minimum wage because I

didn’t believe that a one size fits all model was an effective way of looking at something as

complicated and diverse as the US economy. I also opposed it on conservative grounds believing

that the government had no role in business. Now that I have researched the topic and my

understanding of the issue has grown I oppose it even more. I believe that the $15 federal

minimum wage will do more to hurt the economy because it forces an increase of automation

which leads to a loss of jobs, causes reduced outputs by businesses and leads to higher rates of

inflation. I believe that the $15 minimum wage disproportionately hurts small businesses because

it forces them to either go out of business because they cannot afford to pay the inflated wages,

or causes them to raise their prices in order to adapt to the artificially raised wages which hurts

the company and their customers alike. I also think it doesn’t focus on the right issue because

most people working minimum wage jobs are teenagers or people working a side job, not

workers desperate to feed their family. The $15 federal minimum wage is a perfect example of

good intentions causing bad results.

My solution to the issue is to leave the federal minimum wage alone and to encourage

state legislation to raise or lower the minimum wage as our system does right now. By doing

this, the people of each state, who know how their local economies work better than outsiders,

can pass laws according to what suits them. The federal minimum wage looks at all economies

the same and doesn’t take into consideration local cost of living or the income of an area. But if
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the state took care of the minimum wage, low cost of living states like Mississippi would be able

to account for how their own economy functions instead of being victim to a wage law that

applies to the high cost of living state of California. $15 is worth much more in Mississippi than

it is in California but the federal law assumes they will be worth the same. By doing this, states

will be able to vote on whether to raise or lower the minimum wage easier than it would be to

pass at the federal level, and states would be able to create laws that reflect their own economies

instead of laws that attempt to account for all.

Works cited

American Enterprise Institute. Seattle (city only) monthly employment, Jan 2007 to Dec 2015.

Forbes.com. February 19 2016.

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Congressional Budget Office, 8 July 2019, https://www.cbo.gov/publication/55410.“The Effects

on Employment and Family Income of Increasing the Federal Minimum Wage.”

Kelly, Jack. “The Unintended Consequences Of Raising Minimum Wage To $15.” Forbes,

Forbes Magazine, 10 July 2019, Web. 7 October 2019.

Reasontv. The $15 minimum wage is turning hard workers into black market lawbreakers.

YouTube.com Reasontv. 11 October 2018. 13:33.

Sabia, Joseph J., and Richard V. Burkhauser. “Minimum Wages and Poverty: Will a $9.50

Federal Minimum Wage Really Help the Working Poor?” Southern Economic Journal,

vol. 76,

no. 3, 2010, pp. 592–623., doi:10.4284/sej.2010.76.3.592.

“Survey of US Economists on a $15 Federal Minimum Wage.” Employment Policies Institute,

https://www.epionline.org/studies/survey-of-us-economists-on-a-15-federal-minimum-wage-

2/.